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(Kitco News) - The physical bullion market appears to be stuck in neutral as investors maintain and "wait-and-see" approach regarding the direction of central bank monetary policies worldwide.
Falling goldgold prices through June were not enough to entice investors into the physical market as the U.S. Mint saw a sharp decline in sales. At the same time, the Perth Mint saw slightly better sales last month and reported strong growth compared to last year.
However, both global mints have seen weaker demand so far this year compared to last year.
Analysts have noted that it has been a challenging environment for gold as central banks, led by the Federal Reserve, continue to raise interest rates. Although the U.S. central bank left interest rates unchanged last month, it signaled that it could raise rates two more times this year as it continues to fight inflation.
According to the CME FedWatch Tool, markets have all but priced in a 25-basis point move in two weeks.
Data from the U.S. Mint showed that it sold 42,500 ounces of gold in various denominations of its American Eagle coins. Sales are down 50% from May. Meanwhile, gold bullion sales are down 18% compared to last year.
Looking at the first half of 2023, the U.S. Mint said it sold 733,500 ounces of gold, down 1% from the first half of 2022.
On the other side of the world, the Perth Mint reported sales of 733,124 ounces of gold last month, up 0.3%. For the year, sales are up 12%.
The Perth Mint said that solid sales in the U.S. has been driving its bullion sales.
"Gold's steady price slide over the month of June presented a buying opportunity for our clients, resulting in a 0.3% increase in sales over the previous month. The current strength of interest was reflected in the fact that ounces sold were 12% ahead of June 2022," said Neil Vance, general manager of minted products at the Australian-based mint.
Looking at the first six months of 2023, the Perth Mint sold more than 345,000 ounces of gold, down 32% from the half-million ounces sold in the first half of 2022.
While gold demand has been relatively lackluster, silver demand has been downright dismal.
The U.S. Mint said it sold nearly 1.5 million ounces of one-ounce America Eagle silver coins. Down 7% from last month but up 60% from last year. In the first half of 2023, the mint sold 9.7 million ounces of silver, down 9% compared to the first six months of 2022.
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According to some analysts, the grey metal has struggled more than gold as prices have been impacted on two fronts. Unlike gold, silver is not seen as a major safe type of safe-haven asset and risk against economic uncertainty. Some analysts have noted that rising interest rates and recession fears, weighing on silver's industrial demand, are keeping investors away from the marketplace.
The Perth Mint said that it sold 1.3 million ounces of silver last month, down nearly 30% from May and 12% down from last year.
In the first half of the year, the Perth Mint sold nearly 9.7 million ounces of silver, down 16% from 11.5 million ounces sold in the first half of 2022.
Although demand for gold has held up reasonably well in a challenging environment, Everett Millman, precious metals expert at Gainesville Coins, said that investors are waiting for a clear sign that central banks, led by the Federal Reserve, has stopped their most aggressive tightening cycle in 40 years.
He added that investors have been buying gold and silver through 2023, but there could be a little bit of fatigue in the marketplace as potential discounts in the market have been short-lived.
"Investors have been buying gold at lower prices this year, but there has not been a major correction to facilitate physical demand," he said. "Counter-intuitive to the market fundamentals. We are seeing some market fatigue as investors wait to see that gold and silver prices return to a bull market and go higher."
Millman said that it makes sense many investors are sitting on the sidelines as it's still not clear that the Federal Reserve will be ending its tightening cycle anytime soon. He said that he expects physical demand to pick up when the market a clear signal from the central bank that interest rates have reached their terminal level.
